Estate of Flanigan CA6 ( 2021 )

Filed 8/5/21 Estate of Flanigan CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
Estate of JOHN FLANIGAN, Deceased. H045838
(Santa Clara County
Super. Ct. No. PR179602)
TERESA FLANIGAN, ORDER MODIFYING OPINION
AND DENYING REHEARING
Petitioner and Appellant,
[NO CHANGE IN JUDGMENT]
v.
JAMES FLANIGAN et al.,
Objectors and Respondents.
THE COURT:
It is ordered that the opinion filed herein on July 20, 2021, be modified as follows:
On page 4, last full paragraph, in the second sentence beginning with “Respondents
agreed . . . ,” add the words “at the hearing below” after the word “agreed” so that the sentence
reads as follows:
“Respondents agreed at the hearing below that the court could decide whether they had
triggered the no contest clause as a matter of law but asserted that the unclean hands defense
raised factual questions.”
On page 11, last paragraph, add the following sentence after the first sentence
beginning with “The order is reversed . . .”: “Respondents may seek a ruling on their
unclean hands defense on remand.”
There is no change in the judgment.
The petition for rehearing is denied.
Dated:_______________________ _____________________________
ELIA, J.
____________________________ _____________________________
GREENWOOD, P.J. DANNER, J.
2
Filed 7/20/21 Estate of Flanigan CA6 (unmodified opinion)
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
Estate of JOHN FLANIGAN, Deceased. H045838
(Santa Clara County
Super. Ct. No. PR179602)
TERESA FLANIGAN,
Petitioner and Appellant,
v.
JAMES FLANIGAN et al.,
Objectors and Respondents.
Teresa Flanigan appeals from an order determining, as a matter of law, that her
brothers James, Kevin, Tom, and Allen Flanigan (collectively, respondents) did not
violate the no contest clause in their father’s trust. We shall reverse and remand.
I. BACKGROUND
A. Factual Summary
John A. and Frances B. Flanigan, a married couple, had seven children born
between 1949 and 1964: James, Kevin, Thomas, Teresa, Greg, Melvin, and Allen.
John and Frances executed the John A. Flanigan and Frances B. Flanigan 1982
Revocable Trust (the 1982 Trust), of which they were both settlors and trustees. They
transferred certain property, including their residence at 426 Mundell Way in Los Altos
(the residence) to the 1982 Trust. The 1982 Trust specified that the residence was and
would remain community property.
In December 2000, after being diagnosed with Alzheimer’s disease, Frances
executed a power of attorney naming John as her attorney-in-fact.
In 2009, John and Frances deeded a 10 percent interest in the residence to Teresa;
they continued to hold an undivided 90 percent interest in the residence as trustees of the
1982 Trust.
On November 7, 2013, John revoked the 1982 Trust. Immediately thereafter, he
executed the 2013 John A. Flanigan Revocable Trust (the 2013 Trust). The 2013 Trust
named Teresa as trustee and provided that “[t]he trustee shall hold, administer, and
distribute the property described in the Schedule of Trust Assets (which is attached hereto
and made a part of this trust instrument), any other property that may be hereafter subject
to this trust, and the income and proceeds attributable to all such property, in accordance
with the provisions of this instrument.” The residence is listed on the attached schedule
of trust assets. The schedule of trust assets also states: “I hereby grant, transfer and
convey to the Trustee of the 2013 John A. Flanigan Revocable Trust all of my right, title
and interest in and to all jewelry, objects d’art, clothing, household furnishings, and all
other personal effects, and all other real and personal property that I own now or acquire
later during my lifetime, including my interest in any real property, together with all of
my cash, bank accounts, stocks and bonds, general and limited partnership interests,
business interests, promissory notes and trust deeds payable to me, or my interest in any
such property, together with any insurance on such property.”
Article Five of the 2013 Trust provides that, upon John’s death, the trustee shall
distribute John’s interest in the residence to Teresa if Teresa “forgives the payable due
her, currently in the principal amount of $426,000, exclusive of any accrued interest”;
“the settlor accepts such forgiveness”; and Teresa “survives the settlor.” Article Five
further provides that the gift of the residence to Teresa “shall lapse” if she “does not
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survive the settlor, or if [the residence] is not in the trust on the date of the settlor’s
death.” The 2013 Trust provides that, in the event John is not survived by Frances, the
remainder of the trust property be divided equally among James, Kevin, Thomas, Teresa,
Greg, and Allen.
The 2013 Trust includes a no contest clause. That clause provides, in relevant
part, that a beneficiary’s right to take under the trust shall be void if the beneficiary
“[f]iles a pleading to challenge the transfer of property on the grounds that it was not the
transferor’s property at the time of the transfer.”
Also on November 7, 2013, John executed a pour-over will gifting all of his assets
to the 2013 Trust.
Finally, John (for himself and as Frances’s attorney-in-fact) and Teresa executed a
trust transfer deed (the 2013 Deed) on November 7, 2013. The 2013 Deed provided:
“FOR NO CONSIDERATION, WE, JOHN A. FLANIGAN and FRANCES B.
FLANIGAN, husband and wife, and I, TERESA FLANIGAN, an unmarried woman, as
joint tenants HEREBY GRANT to TERESA FLANIGAN, as Trustee of the 2013 John
A. Flanigan Revocable Trust, the real property commonly known as 426 Mundell Way,
located in the City of Los Altos, County of Santa Clara, State of California . . . .”
The 2013 Deed was never recorded.
Frances died in 2014; John died in 2015.
B. Procedural History
Teresa, in her capacity as trustee of the 2013 Trust, filed a Probate Code
section 8501 petition seeking an order declaring the residence to be owned by her as
trustee. Among other things, Teresa stated that such an order was required because the
1
All further statutory references are to the Probate Code unless otherwise
indicated.
3
Recorder’s Office would not accept the 2013 Deed for recording, leaving “record title in
the name of the non-existent 1982 Trust, which was properly revoked in 2013.”
Respondents, as beneficiaries, opposed the petition, arguing that the residence was
not an asset of the 2013 Trust at the time of John’s death. Among other things,
respondents maintained that the 2013 Deed was defective because it “purports to transfer
interests not in fact held by the grantees.” Specifically, the 2013 Deed identified grantees
John, Frances, and Teresa as joint tenants, but the prior deed showed the residence was
held 90 percent by John and Frances as trustees of the 1982 Trust and 10 percent by
Teresa as an unmarried woman.
Thereafter, Teresa requested that the probate court find that respondents had
violated the 2013 Trust’s no contest clause. She argued that respondents’ opposition to
her section 850 petition constituted a pleading to challenge the transfer of property on the
grounds that it was not the transferor’s property at the time of the transfer, thereby
violating the no contest clause.
Respondents opposed Teresa’s request, asserting that they “admit and
acknowledge John and Frances[’s] ownership interest in the [residence].” They
characterized their opposition to Teresa’ section 850 petition as claiming that no transfer
of the residence to the 2013 Trust ever occurred. Respondents also asserted an unclean
hands defense, arguing that Teresa’s misconduct—including failing to provide requested
documents in a timely fashion—shaped their opposition.
Teresa urged the court to determine whether respondents had violated the no
contest clause without holding an evidentiary hearing, arguing that it was a question of
law. Respondents agreed that the court could decide whether they had triggered the
no contest clause as a matter of law but asserted that the unclean hands defense raised
factual questions.
The probate court ruled as a matter of law that there had been no violation of the
no contest clause. Teresa timely appealed.
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II. DISCUSSION
A. Legal Principles
1. The Enforceability of No Contest Clauses
A no contest clause in a trust instrument acts as a disinheritance device. (Donkin
v. Donkin (2013) 58 Cal.4th 412, 422 (Donkin).) “ ‘[I]f a beneficiary contests or seeks to
impair or invalidate the trust instrument or its provisions, the beneficiary will be
disinherited and thus may not take the gift or devise provided under the instrument.’
[Citation.]” (Ibid.) No contest clauses “promote the public policies of honoring the
intent of the donor and discouraging litigation by persons whose expectations are
frustrated by the donative scheme of the instrument.” (Ibid.) At the same time, no
contest clauses are in tension with “the policy interests of avoiding forfeitures and
promoting full access of the courts to all relevant information concerning the validity and
effect of a will, trust, or other instrument. [Citation.] In light of these opposing interests,
the common law in California recognized the enforceability of no contest clauses, albeit
strictly construed, ‘so long as the condition was not prohibited by some law or opposed to
public policy.’ [Citation.]” (Ibid.)
In 1989, the Legislature partially codified the law governing no contest clauses.
(Donkin, supra, 58 Cal.4th at p. 423.) The Legislature amended the law a number of
times in the ensuing years. (Ibid.) “The complexity of the [resulting] statutory scheme
actually promoted further uncertainty as to the scope of application of a no contest
clause” as well as increased litigation. (Id. at p. 424.) “In 2005, the Legislature asked the
[California Law Revision] Commission [(Commission)] to . . . study the advantages and
disadvantages of enforcing a no contest clause in a will, trust, or other estate planning
instrument.” (Ibid.)
“In 2008, the Commission issued a report recommending retention, but with
significant revision, of the no contest clause statutes.” (Donkin, supra, 58 Cal.4th at
p. 424.) Among the reasons the Commission recommended retention was that, “[w]hen
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the proper disposition of a transferor’s property is complicated by difficult property
characterization issues, a no contest clause may . . . appropriately operate as a ‘forced
election’ in order to avoid ownership disputes.” (Id. at p. 425, fn. omitted.) “The
Commission gave as an example a situation in which successive marriages resulted in
difficult community property characterization issues . . . .” (Id. at p. 431.) In that
scenario, “[t]he transferor claims that all of the disputed assets are his separate property,
gives a gift to his surviving wife that is clearly greater than the amount she would recover
if she were to contest the property characterization, and includes a no contest clause.
This forces the surviving spouse to make a choice between acquiescing in the decedent’s
estate plan and taking the amount offered under that plan, or forfeiting that amount in
order to pursue her independent rights under community property law.” (Id. at p. 425,
fn. 9.) “As another example, the Commission noted that ‘business partners may have
mingled assets in a way that would make proper division difficult. . . .’ [Citation.] In
such cases, the Commission reflected, ‘a no contest clause and a sufficiently generous
gift can resolve the matter without litigation.’ [Citation.] The no contest clause forces
the beneficiary to make an election. [Citation.]” (Id. at p. 431, fn. omitted.)
“The Commission proposed that the ability of a transferor to use a no contest
clause to create a forced election be continued, but recommended narrowing of the
existing statutory language, which referred to any ‘action or proceeding to determine the
character, title, or ownership of property’ [citations].” (Donkin, supra, 58 Cal.4th at
p. 431.) “The Commission proposed statutory language that instead allowed a no contest
clause to be enforced against: ‘[A] pleading to challenge a transfer of property on the
grounds that it was not the transferor’s property at the time of the transfer,’ provided ‘the
no contest clause expressly provides for that application.’ [Citations.] Accepting the
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recommendation [citation], the Legislature enacted the language proposed by the
Commission, in section 21311, subdivision (a)(2).”2 (Ibid.)
“Section 21311, subdivision (a), of the current law provides in full as follows:
‘A no contest clause shall only be enforced against the following types of contests:
[¶] (1) A direct contest that is brought without probable cause. [¶] (2) A pleading to
challenge a transfer of property on the grounds that it was not the transferor’s property at
the time of the transfer. A no contest clause shall only be enforced under this paragraph
if the no contest clause expressly provides for that application. [¶] (3) The filing of a
creditor’s claim or prosecution of an action based on it. A no contest clause shall only be
enforced under this paragraph if the no contest clause expressly provides for that
application.’ (Italics added.) [¶] The effect of this statute is to make the trust’s no
contest clauses unenforceable unless the beneficiaries’ proposed action is covered by one
of the three specified categories of contest.” (Donkin, supra, 58 Cal.4th at p. 430.)
2. Determining Whether a No Contest Clause Has Been Triggered
“ ‘Whether there has been a “contest” within the meaning of a particular
no-contest clause depends upon the circumstances of the particular case and the language
used.’ [Citations.] ‘[T]he answer cannot be sought in a vacuum, but must be gleaned
from a consideration of the purposes that the [testator] sought to attain by the provisions
of [the testamentary instrument].’ [Citation.] Therefore, even though a no contest clause
is strictly construed to avoid forfeiture, it is the testator’s intentions that control, and a
court ‘must not rewrite the [instrument] in such a way as to immunize legal proceedings
plainly intended to frustrate [the testator’s] unequivocally expressed intent from the reach
of the no-contest clause.’ [Citation.]” (Burch v. George (1994) 7 Cal.4th 246, 254-255
(Burch).)
2
While Donkin provides a thorough discussion of the Commission report that led
to the enactment of section 21311, we also grant respondents’ request to take judicial
notice of the legislative history of that provision. (Evid. Code, §§ 452, subd. (c), 459.)
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3. Standard of Review
“The interpretation of a will or trust instrument presents a question of law unless
interpretation turns on the credibility of extrinsic evidence or a conflict therein.
[Citations.]” (Burch, supra, 7 Cal.4th at p. 254, fn. omitted.) Below, the parties agreed
that the court could decide whether the no contest clause had been triggered as a matter of
law and the court did so. Our review is de novo.
B. Analysis
At issue is whether respondents’ opposition to the section 850 petition violated the
2013 Trust’s no contest clause. To resolve that issue, we examine the underlying
circumstances and the language of the no-contest clause to determine the purposes that
John sought to attain by the provisions of the 2013 Trust. (Burch, supra, 7 Cal.4th at
pp. 254-255.) We then ask whether respondents’ opposition intended to frustrate John’s
unequivocally expressed intent. (Ibid.; Cook v. Cook (2009) 177 Cal.App.4th 1436,
1442.)
We begin by considering whether respondents’ opposition falls within the
language of the no contest clause. That clause is triggered by any “pleading to challenge
a transfer of property on the grounds that it was not the transferor’s property at the time
of the transfer.”
Respondents deny Teresa’s claim that they challenged the November 2013 transfer
of the residence to the 2013 Trust; they say they merely challenged the existence of any
such transfer. We are not persuaded. Teresa’s petition sought “confirm[ation]” that the
transfer had occurred. The opposition acknowledged that the 2013 Deed “purport[ed] to
transfer the [residence] to the 2013 [T]rust,” but argued that that deed was defective so
that no valid transfer occurred. Under respondents’ reasoning, any challenge to a transfer
could be recast as an argument that no (valid) transfer occurred. Take, for example, the
situation posited by the Commission involving the use of a no contest clause to avoid
difficult property characterization issues caused by successive marriages. In the
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Commission’s hypothetical, “[t]he transferor claims that all of the disputed assets are his
separate property, gives a gift to his surviving wife that is clearly greater than the amount
she would recover if she were to contest the property characterization, and includes a no
contest clause. This forces the surviving spouse to make a choice between acquiescing in
the decedent’s estate plan and taking the amount offered under that plan, or forfeiting that
amount in order to pursue her independent rights under community property law.”
(Donkin, supra, 58 Cal.4th at p. 425, fn. 9.) But, according to respondents, the surviving
spouse could circumvent the no contest clause by arguing that, to the extent the decedent
purported to transfer assets in which she had community property rights, no valid transfer
occurred. If such circumvention were permitted, then section 21311, subdivision (a)(2)
would never apply. Accordingly, we conclude that respondents’ opposition challenged a
transfer of property—namely, the transfer of the residence to the 2013 Trust.
Respondents also assert that, because they acknowledge that the transferors (John,
Frances, and Teresa) owned the residence, any challenge was not “on the grounds that it
was not the transferor’s property at the time of the transfer.” It is true that respondents
have never disputed that John, Frances, and Teresa possessed ownership interests in the
residence. However, respondents did oppose the section 850 petition on grounds that the
transfer was invalid because the 2013 Deed “did not properly describe [John, Frances,
and Teresa’s] ownership interests” in the residence. Specifically, the 2013 Deed
identified the transferors as joint tenants; in fact, Teresa held a 10 percent interest and
John and Frances held the remaining 90 percent as community property. Thus,
respondents challenged the transfer of the residence to the 2013 Trust on grounds that the
transferors did not hold the property interests in the residence that they purported to
transfer.
The question, then, is whether disputing the nature or extent of a transferor’s
property interest (as opposed to their possession of any property interest) triggers the no
contest clause. The Probate Code answers that question. It defines “property” to include
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“any interest” in real property. (§ 62.) Accordingly, section 21311, subdivision (a)(2)—
and the no contest clause here that mirrors it—applies where a pleading is filed to
challenge a transfer of any interest in real property on the grounds that it was not the
transferor’s interest in real property at the time of the transfer. For the foregoing
reasons, we conclude that respondents’ opposition falls within the language of the
no contest clause.
In addition to that language, we must consider the surrounding circumstances in
our effort to determine John’s intent, which ultimately controls. In November 2013, John
revised his estate plan by revoking the 1982 Trust and executing the 2013 Trust, a
pour-over will, and the 2013 Deed. The 2013 Trust includes a schedule of trust assets,
which specifically lists the residence as an asset of the trust. The schedule of trust assets
also identifies “all [of John’s] other personal effects, and all other real and personal
property” currently owned or later acquired by him as trust assets. Article Five of the
2013 Trust provides that Teresa receive John’s interest in the residence upon John’s death
if certain conditions are met, but that the gift of the residence to Teresa “shall lapse” if
she “does not survive the settlor, or if [the residence] is not in the trust on the date of the
settlor’s death.” The 2013 Deed purported to transfer the residence to Teresa as trustee of
the 2013 Trust. The 2013 Trust’s schedule of trust assets and the Deed of Trust
unequivocally express an intent to make the residence an asset of the 2013 Trust.
Respondents attempt to conjure up some ambiguity as to John’s intent with respect
to the residence, noting that Article Five of the 2013 Trust left open the possibility that
the residence would not be a trust asset at the time of his death. We are not persuaded.
Again, the express inclusion of the residence on the schedule of trust assets and the
execution of the Deed of Trust demonstrate that John intended to place the residence in
the trust estate. That intent is further confirmed by the portion of the schedule of trust
assets identifying all of John’s real and person property, whether currently owned or later
acquired, as trust assets. Clearly John intended to make all of his property, including
10
specifically the residence, trust assets. The language in Article Five on which
respondents rely merely left open the possibility that the residence would later be
removed from the trust estate if, for example, it was sold.
Respondents’ opposition sought an order that the residence was not a trust asset at
the time of John’s death, having never been transferred to the 2013 Trust. That pleading
squarely intended to frustrate John’s unequivocally expressed intent to transfer the
residence to the 2013 Trust.
Respondents note that, in this case, “there was no forced election because the
[they] did not have or assert any independent right to the [residence] . . . .” As discussed
above, the Commission recommended the retention of the no contest clause statutes in
part to maintain the ability of a transferor to use a no contest clause to create a forced
election. (Donkin, supra, 58 Cal.4th at pp. 424, 431.) And no contest clauses like the
one at issue here are used in that manner to avoid ownership disputes. (Id. at p. 425.)
However, “[a] forced election is not a requirement before a no contest clause may be
enforced . . . .” (Estate of Pittman (1998) 63 Cal.App.4th 290, 306-307.) The aims of a
no contest clause, including discouraging litigation and effectuating transferor intent, are
advanced by its enforcement regardless of whether there is a forced election. (Id. at
p. 306.)
For the foregoing reasons, we conclude that respondents violated the no contest
clause.
III. DISPOSITION
The order is reversed, and the matter is remanded to the probate court with
directions to enter a new order finding that respondents violated the no contest clause.
Teresa shall recover her costs on appeal.
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_________________________________
ELIA, J.
WE CONCUR:
_______________________________
GREENWOOD, P.J.
_______________________________
DANNER, J.
Flanigan v. Flanigan et al.
H045838